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Saturday Quiz – May 30, 2009

Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days.

See how you go with the following five questions. Your results are only known to you and no records are retained.

1. A return to a fixed exchange rate system would

2. The crucial difference between a monetary system based on the gold standard world and a fiat currency monetary is

3. In a fiat monetary system, the concept of debt monetisation is inapplicable because

4. Under the gold standard, a country with a chronic balance of payments deficit would face

5. Under a fiat monetary system, the absence of convertibility means

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    This Post Has 2 Comments
    1. Hello Bill,

      I got them all except Q5.

      I answered “There is no reason for people to hold currency to hedge against gold price falls”. This ststement is I think quite correct under a fiat system, where the gold price becomes irrelevant to the functioning of the economy. People may however wish to hold gold to hedge against currency falls.

      The answer: “that the government can motivate people to exchange goods and services in return for public spending by fining anyone of working age who walks down the street.” is mystifying to me. Does this translate as “the Gov can induce demand for its fiat currency by requiring it for the payment of burdensome taxation”?

    2. Reformer, I think yes to your last question. The reason ‘fiat’ curency is popular is that people have to aquire that to pay their taxes.

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